How to sell a manufacturing business
Selling a manufacturing business doesn’t have to be complex. If you know what to do you can cut down on the time-consuming process of selling a business. In this post, I present six steps to guide you on how to make the selling process smoother.
1. Engage a Business Broker
Wise sellers hire a business broker to facilitate the transaction. An experienced broker will
assist you in securing potential buyers,
negotiate the asking price and,
manage all the legal aspects of the deal.
With a seasoned broker in your corner, you’ll avoid some of the common rookie selling mistakes. You also won’t leave money on the table when you walk away.
2. Prepare the Business for Sale
Before you even think of scouting buyers, it’s imperative that your manufacturing business is in the best possible shape. You want to make it an appealing investment to the buyer. Therefore, take time to prepare the business. This may involve:
Getting company financial records in order
Ensure all client and vendor pricing is current and margins are maximized
All equipment should be in good working order and any excess machinery should be liquidated if not needed for growth
Clean up inventory and write-off and liquidate any excess inventory
Minimise any client concentrations, if possible
Secure non-solicits with key employees, if possible
First impressions matter. Buyers may have a handful of potential businesses being presented to them for sale. So, you have a very short window to convince your buyer that your business is worth a second look.
3. Obtain a Business Appraisal
Do you know what your business is actually worth? It’s not uncommon for many sellers, especially those who’ve built their business from the ground up to have an inflated view of the value of their business. A Business Valuation is both a provision of your business’s worth, but also an appraisal of its position in the market and its saleability. I will prepare a Business Valuation (from your prepared financials) considering its past and projected future performance, comparative market position, growth opportunities, current level of demand for the specific type of business, historical sales evidence of similar businesses, and many other factors. The Business Valuation data is used to identify the potential buyer pool, as well as to design a sales strategy to suit your business. Every business sale is different and requires a tailored approach to ensure the best possible outcome.
4. Market your Manufacturing Business
With an asking price in hand, you can now start to market your manufacturing business to prospective buyers. If you’ve hired a business broker, they may even have a curated list of private equity or venture capital firms that they’ve worked with previously who might be good matches. I implement my tried and proven marketing strategy, contacting my extensive prospective buyer’s database with targeted emails, as well advertising your business on over fourteen major business sales websites in Australia, social media, Linkedin and networking. Maintaining confidentiality, actual pictures of your business or your exact location details will not be published in any advertising. Images are generic and non-descript, whilst location details are kept very general such city or region. Ultimately what you want is to be able to reach as wide an audience as possible to increase your chances of closing quickly.
5. Assess Offers and Negotiate a Sale
If you’ve prepared your business well and strategically marketed it, you should start receiving offers from interested buyers. When this happens, it’s key to take a step back so you can carefully review each offer because not every offer will be a quality proposal. That’s why having an experienced business sales broker is so invaluable. They’ve dealt with hundreds of deals and so will not only help with scrutinising buyers to see whether they’re a good fit and have the necessary finances to close, but they will aid you in negotiating the best deal. I qualify interested buyers. Once I have a shortlist of interested buyers, I determine the strategic fit of each, assessing their expertise, their goals, their motivation for acquisition and their financial capacity. From there, you only progress with buyers who are in a position to purchase your business and give it the best chance of continued success. I will also seek indicative offers from interested parties before proceeding to the next step.
6. Closing the Sale
This is arguably the most exciting part of the entire transaction, but not necessarily the easiest. I will negotiate price and contract terms on your behalf, representing you in all aspects of the sale including sale price, contract terms, special conditions, management of freehold and lease terms to obtain optimum sale price and deliver efficient completion, whilst remaining transparent with you throughout the entire negotiation process.
Due diligence is executed in financial, legal and other business areas and is completed by the buyer or by external accountants and or due diligence experts working on behalf of the buyer. I will assist you in this process to ensure a seamless and successful transaction, collaborating with you and your team executing the due diligence checklist. If do require assistance with legal or financial help during this process, I partner with leading and reputable specialists including accountants, lawyers, tax advisors and fund managers to ensure you are in safe hands.
The Bottom Line
When all is said and done, successfully selling a manufacturing business is possible with careful planning, relying on the help of trusted M&A advisors, and timing the sale correctly. By following the six steps highlighted above and working with an experienced business broker like the Magellan Business Sales team and your legal team, you can streamline the selling process. Get the best possible deal and don’t leave money on the table. Contact us for more information.
Looking for more insight on selling a business? Check out my market updates.
Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.